102 CIRCULAR 10 0, U. S. DEPARTMENT' OF AGRICULTURE 



these companies may have had some unoccupied storage space, but 

 they saved the interest and insurance during the period the associa- 

 tion stored the purchases. These companies could probably have had 

 the green tobacco redried more cheaply than the association did, 47 

 but this practice would have been more than offset by the accumu- 

 lated carrying charges, in instances in which the tobacco was stored 

 by the association for a year or more, and by the fact that the 

 accumulation of stocks forced the association to sell its redried to- 

 bacco at prices somewhat below the original reserve prices placed on 

 redried tobacco. 



It would appear that the purchasers of association tobacco ob- 

 tained another advantage. The stocks taken over by the receivers 

 have been found to be greatly overgraded. Some of the tobacco 

 specialists of the Bureau of Agricultural Economics, who kept in con- 

 stant touch with the grading of the association, state that on the 

 whole it was well done and that all of the overgraded tobacco could 

 not possibly have been the result of faulty grading only. Within 

 every grade of tobacco there is a certain range of quality. Some 

 of the tobacco in the upper range might go into a higher grade and 

 some in the lower range might go into a lower grade. It would 

 appear that several of the companies that bought from the associa- 

 tion accepted only the best tobacco in each grade ; the remainder then 

 fell into the upper portion of the next lower grade. To what extent 

 this so-called " creaming " practice took place would be impossible 

 to state but, on examination, the association's ledger accounts of 

 some of these tobacco companies indicate that rejections were by no 

 means an infrequent occurrence. 



The former general manager of the association maintains that 

 it was not possible for customers to reject tobacco in this way. When 

 tobacco was purchased from the association, from 10 to 20 per cent 

 of the hogsheads were opened by the examiners of the purchasing 

 company before the tobacco left the association's storage warehouses. 

 An inspector of the association was present at the customer's ware- 

 house when the hogsheads were delivered, and this inspector, together 

 with an examiner of the buyer, examined the tobacco. In case the 

 tobacco did not come up to specifications, the hogsheads were re- 

 turned to the association or a lower price was arranged by mutual 

 consent. 



It is difficult to account for the large quantity of overgraded to- 

 bacco taken over by the receivers, unless this " creaming " took place 

 or unless there was substitution by the redriers. 



MEMBER AND NONMEMBER PRICES 



It is maintained by some farm leaders in the tri- State area that 

 the operations of the tobacco cooperative association resulted not only 

 in better prices to the members than they would have received if 

 they had been unorganized but in better prices to nonmembers as 

 well. Table 42 and Figure 19 show the index numbers of the pur- 

 chasing power (prices deflated by the bureau of Labor Statistics 

 Index Numbers) of flue-cured, dark-fired, sun-cured, and all United 



47 It is probable that tobacco could have been redried at about $1 or less per 100 

 pounds, whereas the association paid $1.75 or more. 



